Question For UK Dopers Who Are In The Know.

Factual Questions
1

UK Dopers,

I work for a medium sized US company, who is owned by a larger UK company. The UK company is a PLC company, if that matters at all. Since they are in the UK, we don’t get much word from them across the ocean, just the occasional, “Full speed ahead. All systems normal” email.

Here’s the situation. I was talking with a manager of mine during some down time at work recently, and the conversation strayed towards our UK umbrella company. I mentioned to my manager that I’ve noticed that the value of the stock of our UK company, which is our stock as well, had fallen somewhat recently. This is the stock that some employees, but not myself, have in their 401Ks. The market that we are in is rather conservative, so the investors of our stock aren’t the most radical or varied in nature. The movement of a point either way is a big deal.

My manager replied that that was an intentional move by our UK company. They purposely talked the value of the stock down. I did not fully understand what the reasoning behind my manager’s answer was, but she is very smart, and it is not typical of her to just make stuff up.

Here is what I gleamed from her explanation. The UK market economy is still based on the old arcane lordship hierarchy. To put a spin on it, the UK system is still the system that was the cause of the American Revolution. This boggles me, but probably only because it is different from the market economy that I was born and raised in. My manager went on to say that in the UK there really isn’t private property for the common person, and that only the Lords are allowed to participate in the trading of stocks. I found this too hard to believe, but didn’t say anything at the time.

The reason that the value of the stock was being talked down is because of the difference between the US market where anyone can buy or sell a share of the company, versus the UK market where only a priveledged few can trade stocks. And this priveldged few want to hold on to a majority of the shares of stock of the company that I work for. So they are purposely making it unattractive to any outside investors.

Please explain to me, in depth, the workings of the UK market versus the US market, and if private property really does exist in the UK.

Count to think of it, every British movie that I see, the characters are either Lords living is a country mansion, or renting a flat in London. Hmmmm…

Extremely curious. Please advise.

2

That’s a load of nonsense. It works in the same cutthroat way as in the US where he who has the most dosh has the most influence. Now some of these guys may be lords or knights, but they’re most likely to be so because they were captains of industry or whatever. Some will be hereditary peers who may have inherited wealth, but you lot have people who inherit wealth as well.

3

Anyone can own shares or property, the UK has one of the highest rates of home ownership in Eurpoe.

4

Where on earth did she get this from?!?! It is absolute total nonsense, or what we Brits call “utter utter utter bollocks”. Check out motleyfool.co.uk for the fundamentals of UK investment (it’s pretty similar to the US).

This is technically true, but in practical terms it is nonsense - depending on where you buy, when you buy a house, you also buy a leasehold, because the land technically belongs to someone else (like maybe a lord, or a corporation, or the crown). This is typically 99 years (or part thereof) and costs £1 for that 99 years. There are insurmountable restrictions if the “owner” of the land wants to sell it. I.e. they can’t. So while the land may actually be “owned” by someone else.

Yeah, you’re guessing right: it’s highly unrepresentative. For more realistic portrayals of the majority of Brits, check out the films of Mike Leigh.

5

I would rethink your assessment that your manager is very smart. What she said is complete and utter bollocks.

6

She’s having you on. For a start anyone can buy shares in the UK (possibly not under 18s but I don’t know). Well, I can buy shares if I want and I’m most certainly not a lord.

7

Oops, lost the last part of my sentence there: ‘So while the land may actually be “owned” by someone else, the “rental” cost is negligible, and really and truly, it isn’t.’

8

I see that jjimm was slightly quicker off the mark than me, but you will gather that “utter bollocks” is a favorite UK term for “total BS”.

I’m not so sure about jjimm’s answer on leasehold. While a lease did apply to me when I owned a flat, I don’t recall any of my houses being on property that was only leased to me. Mind you, in one of them Baron Tollemache had the right to retrieve any birds that he shot that fell on my land.

9

Amarone, that is funny about the birds on your property. If it is any consolation, the US is rife with pointlessly out of date laws as well. Does your deed actually have the name Baron Tollemache on it?

We have the same sort of thing in the US, if you are not aware, called the Mineral Rights of a property. If you move out to, say, Montana and buy a whole lot of acres, but the Mineral Rights are not strictly included in the deed, then the goverment has the right to mine or drill anywhere on your property for these minerals without compensation, or very little, to you. Most people don’t have their mineral rights because it is very expensive, and they just take the risk that something of value won’t be found under their land. It is very absurd. From what I hear, the deed actually covers a depth in the ground up to which you own, and don’t own under that.

Thank you all for your input. You have extensively answered my question. Now that I know this, I’m going to have to do a little bit of research digging into the stock share ownership of the company that I work for, especially since some employees’ 401Ks depend on it.

10

Again, I recommend registering for motleyfool.co.uk - there’s a message board dedicated to each stock traded on the London Stock Exchange, which has rumours, announcements, theories, etc. which might help you find out more about what’s going on.

11

I don’t live there any more, but he was specifically referenced by name in the covenants. This is not something from way back - the covenants were created in the late 1980s when the Baron sold some farmland in Cheshire for development. As it is a big shooting area (pheasants, mostly), he was probably protecting his ongoing shooting interests.

As for the 401k, your co-workers might want to consider whether it is wise to have both their current income and future pensions dependent on the success of one company. Many people advise against having significant retirement funds invested in your employer’s stock.

12

As many have stated, your manager’s statements about who may trade in shares or own property within the UK are utterly false.

More or less anyone can buy and sell stocks and shares. As for prviate property, in fact the purchase and ownership of private property is if anything more of a social obsession here than it is in many European countries.

As an entirely separate issue, there are circumstances in which a company might wish to encourage its stock to be valued less highly than before. For example, a company might do this to avoid being noticed by predatory companies interested in acquiring good performers in a given market sector, or to make a takeover bid less attractive.

However, although there can be legitimate reasons for a company to pursue such tactics, it is quite rare for companies to do this. By and large, the purpose of any company is to augment the wealth of whoever owns it, and if it is a quoted company (sells stock) then the owners want that share price to be as high as it can be.

It is clearly the case that either your manager hasn’t a clue what she’s talking about, or is being less than honest with you - if I were you I would ask her which explanatin is correct.

In my experience, it is wise and usually quite safe to assume that managers are holding back important information and making decisions behind closed doors about what they think you need to know or should be told. This activity is always in their interests, and never in yours. You don’t need to be paranoid to believe this, just moderately experienced in the way that companies treat their employees.

13

I wonder if there is a knock-on effect on pension schemes that is having some effect on you.

I would not bother with a thing your manager mentioned, she is good at bullshit, but she is not as bright as you imagine.

Up to now in the UK our pensions have been based mainly on final salary, you get a proportion of your final earnings, usually a maximum of two thirds, but quite commonly one half, plus a lump sum payment of up to three times your annual pension income.

Many pension funds are having problems with the security of the fund partly because the rules regarding security have been changed, and also because folk are living longer.

The result is that many pension funds are changing to money purchase schemes (which are cheaper and all the risk is passed on to the employee), where the amount you get will depend upon how well the fund has performed over the years, as your pension pot grows, it will mature and the final total is used to buy an annuity - your pension.

This is not as certain a guaruntee as final salary, it might even pay out more, but there is more of an element of risk.

Some companies are having to make provision in their budgets for pensions funds shortfalls, which naturally show up on profits and balance sheets, and so can affect share prices.

Many of these funds were doing so well that companies took a pension fund payment holiday, thus boosting their apparent profits, and thus boosting their share price.(which helps the director pay deal no doubt)

It’s one of those things we all learn about in our domestic lives, that it is better to put something away when times are good, as a safeguard against times being not so good.

It would seem that company accountants, and directors are not as prudent as this, preferring to look at short terms gains than at the bigger and longer term view.

As for the manager, well I would recomend you check out any stuff she says, the internet is very powerful - I think you will get an eye opener.

14

casdave - the US has gone through a similar process. The 401(k) is what you called a money purchase scheme. You get to put money tax-free (i.e. gross) into a retirement fund. It grows (or shrinks, based on the last few years) tax-free and is taxed as income when you withdraw. The employer administers the plan and usually will also make contributions, usually based on what you yourself contribute. For example, if you put in 5% of your salary, the employer may put in 2.5% In that sense, the plans are usually less generous than the UK where the employer will often contribute 5 - 10% with no requirement on the employee’s part to contribute.

There are lots of other differences, but I’ll leave those for if/when someone creates a thread on 401(k) plans.

15

I’m willing to bet that your manager was having to stab their hand with a pencil to keep from laughing out loud, as you swallowed this, hook line and sinker.

Nasty sort of game to be playing- torturing Americans, a la Simon Callow in Four Weddings and a Funeral (“no, I don’t know Oscar Wilde personally, but I can speak to someone who can get you his fax number”)

Next time you call, they’ll probably tell you that in the UK, we have to ask the Queen’s permission to have children, we don’t have any windows in our houses, and that the Speaker of the House of Commons is a badger.

16

Am I right in assumming (I was never a homeowner until I left the UK) that you say “depending” as it is also quite possible that your potential home is on “freehold” land, where you do own the land as well?

17

Yes, we also own property freehold. Almost all flats are leasehold and most houses are freehold.

18

Yeah, I was slightly wrong in emphasis. Some houses are leasehold, but it’s unusual.

19

Fierra owns her house, and rents it out too. She also owns stock in a few companies.

The movies representing the UK as being either Lords and Ladies in stately homes or professional couples crammed into 200 square-foot flats in London are about as representative as the continual dreck from Hollywood that shows 99.99% of the US living in New York or LA.

Your manager is grossly misinformed.

20

Of course he is. I ran into Peter Hain in Hyde Park last week. Here’s a photo I took of him.